In this article, I will take a look at SDL plc's (LSE:SDL) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of SDL's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Have SDL's earnings improved against past performances and the industry?
SDL's trailing twelve-month earnings (from 30 June 2019) of UK£17m has increased by 1.2% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 48%, indicating the rate at which SDL is growing has slowed down. What could be happening here? Well, let's examine what's occurring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, SDL has fallen short of achieving a 20% return on equity (ROE), recording 7.0% instead. Furthermore, its return on assets (ROA) of 4.6% is below the GB Software industry of 6.1%, indicating SDL's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for SDL’s debt level, has declined over the past 3 years from 15% to 11%.
What does this mean?
SDL's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as SDL gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research SDL to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SDL’s future growth? Take a look at our free research report of analyst consensus for SDL’s outlook.
Financial Health: Are SDL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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